24 Hour Fitness to Restructure Under Chapter 11 Due to COVID-19
24 Hour Fitness announced it has voluntarily filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware, due to the disproportionate impact of the COVID-19 pandemic.
According to a media release concerning the filing, the company expects to secure approximately $250 million in debtor-in-possession (DIP) financing. Subject to court approval, the DIP financing, combined with the company’s cash from operations, is expected to provide sufficient liquidity and allow the company to continue operations, including club reopenings, without interruption during the Chapter 11 process.
“If it were not for COVID-19 and its devastating effects, we would not be filing for Chapter 11,” said Tony Ueber, the CEO of 24 Hour Fitness, in a statement. “We expect to have substantial financing with a path to restructuring our balance sheet and operations to ensure a resilient future. The COVID-19 environment has proved that attention to health and fitness are more important now than ever before. As a result of this restructuring, we will gain financial strength and flexibility to accelerate our business transformation plan, which includes reinvestment in our existing clubs, opening new clubs and introducing several new innovative products and services that will enhance the fitness experience for our club members and guests for many years to come. I want to thank our team members for their unwavering commitment and our club members for their continued loyalty during such an unprecedented period in our lifetime and company history.”
According to the release, 24 Hour Fitness has asked the court for authorization to continue paying team members’ wages, salaries and benefits and to continue its various member programs.
As a part of the restructure, 24 Hour Fitness will close around 100 locations, according to CNN. As a result, it will boast around 300 locations nationwide.